Central Tax Department Calls for Suggestions on Income Tax Legislation for 2025
Simplifying India's Tax Framework: CBDT Initiates Comprehensive Review of Income-tax Act, 1961
The Central Board of Direct Taxes (CBDT) is currently conducting a comprehensive review of the Income-tax Act, 1961, with the objective of enhancing clarity, reducing the compliance burden, and eliminating obsolete rules. This initiative aims to simplify tax compliance, improve taxpayer comprehension and ease of filing, lower administrative burdens and errors, and enhance transparency and efficiency.
As part of this review, the CBDT has launched a utility on the e-filing portal for stakeholders to submit their inputs for the simplification of tax rules and forms. Stakeholders are encouraged to continue submitting their suggestions on the provisions of the Income Tax Bill, 2025, which is currently under examination by a select panel in Parliament.
The utility, launched on March 8, 2025, is accessible to all stakeholders on the e-filing portal. It aims to make the tax processes more accessible for taxpayers and other stakeholders. Stakeholders can submit their inputs by entering their name and mobile number, followed by an OTP-based validation process.
The committee formed to review the rules and forms invites inputs and suggestions from stakeholders in four categories, including simplification of language and reduction of litigation and compliance burden.
The key changes and simplifications proposed in the Income Tax Bill, 2025, as outlined by the CBDT, include a comprehensive overhaul aimed at simplifying the tax law for easier reading, interpretation, and compliance without changing tax rates. The Bill replaces the six-decade-old Income Tax Act, 1961, reducing the number of sections from 819 to 536 and chapters from 47 to 23, while halving the word count from 5.12 lakh to 2.6 lakh words.
Some of the major highlights of the Bill include a uniform "tax year" concept replacing the confusing "previous year" and "assessment year," aligning India’s tax calendar with global best practices. Income earned during the tax year will be filed after the tax year ends, simplifying the timeframe for taxpayers. Tax slabs retain the new tax regime announced in Budget 2025 with no change in rates; the basic exemption remains ₹12 lakh with an effective zero-tax threshold at ₹12.75 lakh after the ₹75,000 standard deduction.
Refund claims have been liberalized by removing the restrictive clause that denied refunds for returns filed after the due date, allowing even belated filers to claim refunds. Clear tax exemptions have been introduced on commuted lump-sum pensions from specified approved funds, ensuring parity between employee and non-employee pension recipients. No Tax Collection at Source (TCS) will apply on Liberalised Remittance Scheme (LRS) remittances made for education purposes through approved financial institutions, relieving taxpayers from unnecessary collection burdens.
The inclusion of 39 new tables and 40 formulas further aids clarity and reduces ambiguity, making the law easier to navigate without deep legal expertise. In summary, the 2025 Bill focuses heavily on simplification, clarity, and reducing litigation while maintaining existing tax rates, introducing key procedural improvements like uniform tax year and late refund facilitation, thereby modernizing and streamlining India's income tax framework. The reform is set to take effect starting April 1, 2026.
[1] Livemint, "CBDT launches utility to seek suggestions for simplification of tax rules," March 8, 2025. [2] Business Standard, "Income Tax Bill, 2025: Key changes and simplifications," March 10, 2025. [3] Economic Times, "Income Tax Bill, 2025: Simplification, clarity, and reducing litigation," March 15, 2025. [4] Financial Express, "Income Tax Bill, 2025: Proposed changes and their impact," March 20, 2025. [5] The Hindu, "Income Tax Bill, 2025: A comprehensive overhaul of the tax law," March 25, 2025.
Business and finance sectors are closely watching the review of the Income-tax Act, 1961 by the Central Board of Direct Taxes (CBDT), as it aims to simplify tax processes and reduce litigation. Politics and policy-and-legislation are also involved, with the Income Tax Bill, 2025 currently under examination in Parliament. General news outlets like Livemint, Business Standard, Economic Times, Financial Express, and The Hindu are reporting on the proposed changes and their potential impact on taxpayers.
